Further Thoughts On The Bailout

I watched Secretary Paulson on the Sunday shows. It was exactly like the Iraq war setup. We don't know exactly what is the right thing to do but it is urgenturgenturgent and if we don't THE SKY IS FALLING/the country will fail and you won't have any credit cards and OHMYGODHURRYHURRYHURRY. Well, really, I do think this can wait until we read the bill. And notice that it contains passages like the one above.

That said, the only person I trust on matters like this is Robert Reich. He agrees that we have to do it but not because he is convinced that it is the right thing to do. Rather it is a set up.

Put yourself in the shoes of a member of Congress, including our two presidential candidates. The Treasury Secretary and Fed Chair have told you this is necessary to save the economy. If you don’t agree, you risk a meltdown of the entire global financial system. Your own constituents’ savings could go down with it. An election is six weeks away. Besides, in the last two days of trading, since rumors spread that the Treasury and the Fed were planning something of this sort, stock prices revived.

Now – quick -- what do you do? You have no choice but to say yes.

But he suggests five conditions --

1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year’s other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street’s outsized political power – especially when that power is being exercised to get favorable terms from taxpayers?

4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

It would be a start.